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©2015 IBM Corporation1 12 October 2015
Customers increasingly requiring connected insurers
Capturing hearts, minds and market share
Lee-Han Tjioe
Insurance Industry Leader Europe IBM
London, October 5, 2015
©2015 IBM Corporation 12 October 20152
We surveyed 12,000 consumers in 24 countries on their insurance relationships, value preferences and switching behavior
Source: IBM Institute for Business Value survey data 2014, n=12,210
> 50 years
30-50 years
< 30 years
Male
Female
Very high
High
Average
Low
Very low
Income
Age
Gender
includes
the U.K.
n=539
©2015 IBM Corporation 12 October 20153
U.K. Insurance clients are looking for providers who take personal care
Low trust
Source: [1] IBV survey data 2007-2014 “Do you agree with the statement ‘I completely trust the insurance industry’?” [2] IBV survey data 2012, 2013, 2014 „Please state how often you switched your insurance provider in the past two years(3) My needs changed and the previous provider could not meet my new needs
44%Of UK customers do not trust insurers 1
50,5%of UK customers switch insurer at least 1 time in last 2 years 2
High churn
32%of UK customers who switched do this because of lack of personal needs served 3
Lack of personal care
©2015 IBM Corporation4 12 October 2015
Value propositions of P&C Insurers require differentiation on 3 main
disciplines
“Transparent”-
“Provide me with better visibility on my risk coverage, claims situations and ensuring right pricing of my individual risks when I need it via multiple connections”
“Share of Mind”-
“Provide more relevant content and services to me via multiple connections which help me to reduce my personal risks”
“Personal”-
“Understand my behavioural preferences and give me tailored propositions, individual advise and pricing for my specific needs”
1
32
Customer
Behavior
Value
Proposition
Technological
Innovation
©2015 IBM Corporation 12 October 20155
Greater granularity in analytics can help fine-tune communication even further – U.K. customers have a different profile
Attitude Cluster Security-
oriented
individualist
Demanding
support-
seeker
Loyal quality-
seeker
Price-
oriented
minimalist
Support-
seeking
skeptic
Informed
optimizer
% of total 16% 16% 18% 16% 19% 15%
% U.K. 24% 6% 10% 30% 8% 22%
Key theme "I know what I
want and
organize
myself"
"I need
personal
advice"
"I trust my
insurer and
remain a loyal
customer"
"I do not like
insurers –
make it cheap
and stay away"
"I need advice
but prefer to
keep my
distance from
insurers"
"I take time to
research to find
the best"
Analytics show how insurers should communicate
Source: IBV survey data 2014. Top n=12,210; U.K. n=539Bottom U.K. n=408. Q: Please select the three channels most important to you when searching for INFORMATION about your insurance coverage.
websiteinsurer
aggregator
telephoneindpt
agents
peers
Security-orientedindividualist
Price-orientedminimalist
Informed optimizer
Customer Behavior
©2015 IBM Corporation 12 October 20156
6
It USES ALL DATA by surfacing up to the second structured and unstructured data collected across INSURER and public
It is REAL TIME providing next best action guidance to customers and associates while they are on phone or in web
It is VIRTUAL in that data is aggregated on demand vs. relying on a centralized warehouse
It is also BATCH leveraging massive amounts of structured and unstructured data to produce insight across the business
It LEARNS AND REASONS the next best action by leveraging sense making, cognitive computing, and big data technology
It uses NATURAL LANGUAGE DIALOGUE in customer interactions via web, phone, associate
It is SELF SERVICE by providing analysts and others across the business a rich data discovery platform customer analytics
Customer
Transforming from Intuition to Cognitive Insight and “Watson” like Guidance to ensure the best possible outcome for each customer and each customer
interaction
Leading insurers adapt COGNITIVE CUSTOMER INTERACTION SYSTEMS to transform into customer centric servicing
COGNITIVE
4
Customer
Behavior
©2015 IBM Corporation 12 October 20157
Value is more than just price. Perception of value matters
Value Proposition
Customers don‘t see price in absolute terms, but as a matter of
fairness
Price consciousness per se has no immediate effect on loyalty....
Loyalty Index
medium
high
Price consciousness
medium
high
Quality consciousness
3,4
3,6
3,8
4
4,2
4,4
...too high ... fair ... too low
Do you think the premium of your insurance is…
global U.K.
Source IBV survey data 2014, global n=12,210, U.K. n=539
Loyalty Index
... perceived quality does
©2015 IBM Corporation 12 October 20158
Insurers brand matters less than expected – for the insurance customer of the future, direct and individual engagement is more important
20% 68% 12%
of sample
low medium high
Brand consciousness
Loyalty Index
medium
high
Only very high brand consciousness increases loyalty1
Brand Enthusiasts
High propensity for individual recognition and two-way engagement.
51%
Millennials
25%
of total disposable
income
The customer of the future tends toward a new view of brand2
Source: [1] IBV survey data 2014, n=12,210, U.K. n=539 [2] „Brand enthusiasm: More than loyalty“. IBV. Nov 2014.[3] „Digital reinvention: Trust, transparency and technology in the insurance world of tomorrow“. IBV Jan 2014
The insurance customer of the future3
� … is less concerned about price alone
� … wants to interact with others when shopping for insurance
� ... is omni-channel
� … is looking for advice
� … is open to new products and ideas
20% 71% 9%
of sample
Value
Proposition
©2015 IBM Corporation 12 October 20159
Customers can accept product complexity, as long as they are enabled to understand how it works.
There is little discernible effect of product complexity on loyalty…
... it is transparency about the productthat counts
“We need to “de-mystify” the world of insurance through increased transparency and reduced complexity.”
CEO, All-lines insurer, Singapore
Loyalty Index
medium
high
low medium high
Product knowledge
42%
44%
Percentage of customers who are highly loyal when they feel…
… their insurance is not complex
… their insurance is highly complex
Source IBV survey data 2014, n=12,210
Technological
Innovation
©2015 IBM Corporation 12 October 201510
The Internet of Things will be an important playing field for insurers – the millennial customer will expect it
Do you own or can you imagine owning devices that connect to the Internet on
their own? (E.g. refrigerator, washing machine
etc.)1
I would be comfortable with my insurer using the data from these
devices
If my insurer used the data from these devices, this would improve my loyalty
36%
56%
Millennials Gen X Boomers
50%
Source IBV survey data 2014, n=12,210; U.K. n=539 [1] Answer “yes”
21%
19%
15%
44%
41%
35%
36%
40%
50%
Millennials
GenX
Boomers
agree neutral disagree
21%
19%
14%
45%
42%
38%
34%
39%
49%
Millennials
GenX
Boomers
agree neutral disagree
U.K.48%
U.K.43% U.K.
31%
Technological Innovation
©2015 IBM Corporation 12 October 201511
INTERCONNECTED INSTRUMENTEDINTELLIGENCE
3 Ecosystems to Co-create
Deliver Customised Insights based on
Deep Customer
Analytics
Orchestrate a broad set
of services around an
integrated set of
customer needs
Offer a real-time
monitoring
proposition on key
risk objects
eCall4All
©2015 IBM Corporation 12 October 201512
New business models are needed to address shifting insurance market requirements
Seamless and automated interaction with clients, third party providers and other insurers
From static data to behavioural and environmental dynamic data
Drastically reduce complexity in supporting processes and IT to become more Agile at lower cost
From: To:
Access
Integration
Legacy Admin
Networked
Data rich
Less is More
©2015 IBM Corporation